The festive season brings numerous financial challenges for Australians, including what PayPal has identified as the "awkward tax". A new study reveals that social discomfort around requesting payment is leaving many Aussies significantly out of pocket, particularly during this period of increased group gatherings and communal activities.

The research shows that half of Australians feel awkward or uncomfortable asking friends to repay them, with 44% opting not to pursue money they're owed due to embarrassment. A notable 46% admit they willingly shoulder the costs for meals, group activities, or coffee runs, even though they are aware they won't be fully reimbursed.

As a result of this self-imposed 'awkward tax', Aussies estimate they're approximately $1,350 short overall from friends neglecting to pay back. This has led to one in five Aussies declining to participate in certain activities knowing they won't be reimbursed, and one in six avoiding covering the bill to prevent people from owing them money.

When it comes to identifying the worst offenders for paybacks, half of Aussies pointed to their friends, followed by coworkers (22%) and adult children (17%). The most common situations leading to a financial shortfall were revealed to be picking up the bill for a group meal (42%), takeaway food runs (32%), and organising group gifts (32%). Other notable scenarios include going on a coffee run (30%) and buying a round of drinks (29%).

To navigate these potentially embarrassing confrontations, many Australians are turning to technology. A quarter of the respondents said they are more comfortable sending an electronic payment request for money they are owed, rather than making a verbal request. This preference jumps to over a third for Australians under 35. Furthermore, 29% prefer to split bills utilising an app, rather than personally chasing individuals to pay their share, which rises to nearly half of those under 35.

Interestingly, not all Australians share this reluctance over paybacks. In fact, 63% make it a point to promptly fulfil their financial obligations and 38% feel embarrassed if they need to be reminded. Overall, 41% of respondents said they would rather owe someone money, a sentiment echoed more by Boomers (50%) compared to those under 25 (31%).

Only a small fraction admitted they sometimes forget to pay people back, with this figure significantly higher among under 25s compared to Boomers. Despite these numbers, Alison O’Brien, Consumer Insights Expert at PayPal Australia, emphasised the importance of managing these financial relationships, especially in the current economic climate.

O’Brien stated, "Everyone is watching their spending more closely with the current cost-of-living pressures, especially approaching what can be an expensive time of year, so it's really important to make sure money doesn't create tension in relationships. While we should all strive to be more fearless to ensure fairness, it's great to see that Australians are finding value in features like PayPal’s payment requests and bill splitting to take some of the sting out of sensitive situations."